NFIP Rate Hikes Rile Senators at Hearing

Members of a Senate Banking Committee who overwhelmingly supported passage of legislation in 2012 that imposes actuarial rates on flood insurance premiums scheduled to go into effect next month sought to distance themselves from their past votes at a 150-minute hearing Wednesday.

At the hearing, senators from Oregon to Massachusetts talked about “implementation” and “affordability” concerns in seeking to anticipate angry voter feedback as the property owners open insurance bills starting Oct. 1 that reflect increases mandated by the Biggert-Waters Act of 2012.

That measure was touted as bringing fiscal stability to the National Flood Insurance Program, but now is assailed for its impact, especially on low- and moderate-income home and business owners along the Gulf Coast.

The increases, according to comments by members of the committee, could be as high as 3,000% in some cases.

“This is not some parochial Louisiana issue, this is a national issue,” said Sen. David Vitter (R-La.). “We might be feeling it first, but this movie is coming to a theater near you.”

Sen. Charles Schumer (D-N.Y.) lamented, “We don’t have an affordability study, but we’re charging people unaffordable rates. What happens if people just drop out of the program?

“Second, we’re building dunes, etc. in New York,” he said. “But these people have got flood rates that aren’t based on the dunes. What about us? I know how hard it is to get the Federal Emergency Management Agency to redo a map because of dunes.

“We don’t have an affordability study, but we’re charging people unaffordable rates. What happens if people just drop out of the program?”

Nezt Page: Warren Worrying

Sen. Elizabeth Warren (D-Mass.) added that, “Over time, I agree it makes sense to move to market rates for flood insurance, but why does it make sense for FEMA to implement the new rates at the same time they’re updating the flood maps?

“There is a major impact on first time home buyers,” she said. “Homeowners in Massachusetts are being asked to pay thousands of dollars that they weren’t asked to pay before,” Warren said. “And seniors on fixed income don’t know what to do.”

Sen. Jeff Merkley (D-Ore.) who led the hearing as chairman of the Economic Policy Subcommittee of the banking panel, cited the problem of homeowners involved in having forced-placed insurance purchased by their lenders when they are informed that they need to buy coverage, “either because of new maps or lenders enforcing a flood insurance requirement.”

He brought up the case of someone forced to buy coverage or pay for a $1,200 policy. “We need to also look for abuses in forced-place insurance” related to flood coverage,” Merkley said.

He also voiced concerns about people being unable to sell homes because flood insurance rates would soar for the new owner. He noted one instance of a potential 10-fold increase in the cost of flood insurance if it were sold.

Craig Fugate, NFIP administrator as an official of FEMA, responded to the onslaught from committee members by agreeing that the law mandates increases that raise affordability issues, but said his hands are tied.

“Let me put my cards on the table, I need your help. I have not found, my attorneys have not found a way ... I do not have the answer you are looking for. I need your help. Without additional legislative support ... I cannot address it,” Fugate said.

He said the affordability study mandated by the law is unlikely to be completed until 2015, but that the law does not tie the implementation of the reforms to the completion of the study.

“I fully believe we should stop subsidizing risk as we go forward for new construction, for secondary homes and for businesses,” Fugate said.

At the same time, “I think we need to look at affordability for people who live there, look at how we can mitigate risk in the future and not grow our risk,’ Fugate said. He also said we should not put people out of their homes because flood insurance is prohibitively expensive.”

Sen. Mary Landrieu (D-La.) testified at the hearing that “we have got to fix Biggert-Waters and I’m calling on Congress to repeal it, radically amend it, or delay it because we need help, not only in Louisiana but throughout the country.”

She said that her concerns “isn’t just about what’s happening on the coast; but about the tragedy that’s unfolding right now in Colorado, and what recently happened in New York, New Jersey and along the East Coast with the devastation of Hurricane Sandy.

“This is an issue that affects our entire nation and it must be addressed,” she said.